Projects

Chaveroo Oil Field, Chaves and Roosevelt Counties, New Mexico

The Company, through its wholly owned subsidiary Ridgeway Arizona Oil Corp., owns and operates a 99% interest in approximately 14,200 acres of San Andres units and leases within the 25,000 acre greater Chaveroo Field. The Company has an average net revenue interest of approximately 75.5%.

The Chaveroo San Andres Field was purchased as a prime candidate for enhanced oil recovery using Carbon Dioxide (CO2) injection (“CO2 flooding”). CO2 flooding is a very effective means to increase oil recovery from existing fields where primary recovery has been ineffective in draining the original oil in place. The Permian Basin of West Texas and New Mexico is the world’s center for CO2 injection, with over seventy CO2 floods in operation today. The Permian-aged San Andres Reservoir is the most common and successfully flooded interval in the Permian Basin. Results to date from several historic San Andres CO2 floods have indicated that enhanced recovery using CO2 injection has the ability to equal or better the original primary recovery of approximately 14% of the original oil in place. Chaveroo is a prime candidate for enhanced oil recovery as, to date, the field has recovered only 14% of the estimated 250 million barrels of oil in place and has similar reservoir properties to many existing San Andres CO2 floods.

In 2007, the Company engaged Advanced Resources International, Inc. (“ARI”), a world leader in CO2 flood consulting, to evaluate the potential for CO2 flooding at Chaveroo. ARI has estimated that full field CO2 flooding at Chaveroo could recover an additional 30 million barrels of oil and, at peak rates, could produce as much as 10,000 bopd. Based on the results of the CO2 pilot flood at the adjacent Milnesand Field, located six miles to the southeast, the Company is confident that a field wide CO2 flood is warranted at Chaveroo.

The Chaveroo San Andres Field was discovered in 1960 and, to date, has produced over 30 million barrels of 29 degree crude oil. The Field produces from fractured, low porosity dolomites at a depth of approximately 4,500 feet. The Company purchased its position in the Field from various operators in 2007 and 2008 for $2.2million. Oil production at the time of acquisition was approximately 20 barrels of oil per day (bopd) from numerous wellbores. Since purchasing interest in the Field, the Company has upgraded surface facilities, reactivated several additional wells, converted several wells to water injectors and plugged and abandoned several wells. Current production at Chaveroo is approximately 50 bopd.

As with the Milnesand Field, the Company believes that considerable potential exists at Chaveroo to increase the well density from 40 acre to 20 acre spacing per well in an attempt to increase primary recovery by accessing undrained portions of the field and to eventually use those new wellbores for CO2 flooding.